What the Rise of Medicare Advantage Means for Skilled Nursing

About 33% of seniors enrolled in the Medicare program have elected to use managed Medicare Advantage plans, and that number is expected to grow — potentially faster than the government thinks.

The Congressional Budget Office has predicted growth in MA plans by about 4% per year, but Dan Mendelson, president of Avalere Health, says his company projects the pace at closer to 6% or 7% per year.

“More and more seniors are voting with their feet,” Mendelson told an audience at the National Investment Center for Seniors Housing & Care (NIC) Spring Investment Forum in Dallas on Thursday.

Niall Brennan, president of the Health Care Cost Institute, thinks that the proportion of Medicare beneficiaries in MA plans will reach 50% faster than other prognosticators believe, a shift that would have a significant effect on skilled nursing and other post-acute care providers.

“Fifty percent of your potential business in the post-acute care space is being managed by somebody who really cares about the bottom line — and won’t be afraid to try and squeeze people,” Brennan said, contrasting the semi-private MA landscape with the more “passive” reimbursements from traditional Medicare.

The panel discussion came the day after NIC released data showing a record low level of managed Medicare revenue per patient day, which fell to $433 in the fourth quarter of 2017.

And as many others have observed, skilled nursing facilities have often lagged behind providers in other parts of the health care spectrum in embracing the future of government reimbursements.

“Initially, it doesn’t feel natural at all, because everyone is used to operating within their own sphere,” Adaeze Enekwechi, vice president for policy, strategy, and analytics at McDermott+Consulting, said.

In her experience — which included a stint as the associate director for health programs at the White House Office of Management and Budget under President Obama — solid Medicare Advantage networks tend to grow organically. For instance, a prominent doctor at a hospital has an internal list of preferred skilled nursing facilities where she likes to send her patients because they have proven to deliver solid results.

But as MA expands beyond a niche product, it’s up to SNFs to provide as much data about their outcomes as possible, Enekwechi said — because if a hospital’s reimbursement depends on the outcome of a patient’s subsequent stay at a skilled nursing facility, the hospital won’t take a flyer on a facility that’s “opaque” with its data.

“Having a data system first, and having a data system with some measure of integrity … turns out to be hugely important,” she said.

Medicaid outlook

After a year in which Congress attempted and failed to repeal and replace the Affordable Care Act, Medicaid may be granted a reprieve in 2018.

The failure of Republican lawmakers to drastically overhaul the Medicaid system in 2017 — including the controversial proposal to switch to per-capita caps, which would have drastically reduced overall Medicaid funding — signals a kind of detente at the federal level on the issue, according to Kristin Welsh, founding partner at Welsh Rose LLC.

Before the Medicaid fight, Welsh said, people tended to look at Medicaid as a black-and-white issue with Republicans hating the program and Democrats loving it.

“That’s not the case … When push comes to shove, they were not rushing the doors to cut Medicaid by several hundred billion dollars,” she said.

While Enekwechi warned that Medicaid could face attacks on the local level, pointing to recent pushes in certain states to institute work requirements for low-income recipients, she also acknowledged the power of the ACA repeal failure in the public imagination — especially since it raised awareness of Medicaid’s key role in long-term care funding..

“This is how we cover nursing home care,” Enekwechi said. “That sat with people in an uncomfortable way.”

Alex covers the long-term health care industry for Aging Media Network, with a specific interest in the intersection of finance and policy. Outside of work, he reads nonfiction, experiments in the kitchen, enjoys pretty much any type of whiskey or scotch, and yells at Mets games — often all at the same time.

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